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Permalink Reply by waltcop on November 2, 2010 at 12:18

Skip, I have a house on a ,22 acre lot located in the Barnett Shale, leased to Cherokee Horn who's leases were bought up by Chesapeake, so I understand, just before my lease expired on Oct. 19, 2010. Chesapeake set up a rig this past week on the site that Cherokee Horn said they were going to drill for my minerals. I have not been contacted by CHK yet and not sure if they will contact or renew my lease. Unlike Louisiana I understand they can just skip over you if they desire.........anyway, there is still some drilling going on in the Barnett.

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Permalink Reply by Skip Peel - Mineral Consultant on November 2, 2010 at 12:45

waltcop, I suggest that you ask some of the Texas members to offer some information as to the method of forming units. Although you have not been contacted, your minerals may already be included in a drilling unit for this Chesapeake well. I don't know the exact location of your minerals, and don't need to, when discussing Cherokee Horn. I have advised a number of clients in the Flower Mound/Lewisville/Lake Highland area in regard to lease offers by Cherokee Horn. My advise was not to enter into a lease with them.

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Permalink Reply by waltcop on November 2, 2010 at 13:23

Skip, We were told by Cherokee Horn that they were going to drill where we signed or not, so we signed (I didn't know beans about leasing then, and still don't know much especially in Texas). We are located in South Grand Prairie and the drill site is at the NW corner of Carrier Pkwy and Camp Wisdom road. I attended a meeting a couple of months ago that several local homeowners held trying to stop the drilling in their back yard and ask the CHK rep at the meeting to have someone to call me because my lease were about to expire. Someone did but told me they would not do anything until the lease expired. Thanks for the info Skip. I will take your suggestion and try to learn about the Texas side of the house.....may be calling again. You have been a tremendous help to me on the GHS site many times.

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Permalink Reply by Skip Peel - Mineral Consultant on November 2, 2010 at 13:35

waltcop, I suggest you ask some of the Texas members to do a search on the Texas Railroad Commission database for wells with Cherokee Horn as operator. Here is my prediction, there are none. Cherokee Horn is a classic Flipper, IMO. My definition of a Flipper is a company that solicits O&G leases while posing as an operator. Their threat to drill whether you signed or not is a typical scare tactic. All the lease offers by CH that I reviewed were for 20% royalty, and later 22.5%. The difference between that royalty fraction and the industry standard 25% is the Over Riding Royalty Interest that represents the bulk of the profit CH would realize on these leases when assigned to Chesapeake. Chesapeake likely paid CH a commission on these leases that covered, or nearly so, their out-of-pocket expenses to acquire the leases including bonuses paid. The principals in CH will likely have a very significant, long term royalty income stream from all the leases they acquired by deceptive means. I doubt that they will have trouble sleeping.

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Permalink Reply by MLE on November 10, 2010 at 4:19

waltcop,

It looks like your land would be included in the Corn Valley Unit. It looks like they are drilling multiple laterals off of a single pad.

There are almost 400 tracts of land in this unit, most of which are less than .5 acres.

I'm more than happy to find out if you are one of these included in the unit, but I'll need a name.

As far as your lease expiring, it would depend on the language of the lease. The well was originally permitted in 2009. A drilling permit in Texas is good for a 2 year period. This technically counts as "operations" which might hold your lease.

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Permalink Reply by waltcop on November 10, 2010 at 8:06

MLE,
That would be a great help, if you know how to find if we are in an unit and in Texas if a permit holds a lease. A friend of ours who was in a different unit and their lease expired about a month before our did said that they signed another lease but with NO additional bonus. However, they were able to increase the percent from 18.5% to 20%, or 25% not sure, wish I could. Their unit is West of our unit about one mile. I think you are correct in that our unit is the Corn Valley, originally anyway, but I understand units were moved around some in the Grand Prairie area. Any help would be most appreciated.

Thanks,
Walter and Joyce Copeland

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Permalink Reply by MLE on November 10, 2010 at 8:22

Walter,

It does not appear that you are included in the unit.

Here is a plat of the unit so you've got a better idea of what is included.

http://webapps.rrc.state.tx.us/dpimages/r/952036

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Permalink Reply by waltcop on November 10, 2010 at 9:08

Hmmm, MLE it appears things did get moved from what we were originally told. We are located in the NE corner of the intersection of Polo road and Carrier Parkway and was told our drill site was going to be at the site shown on the Corn Valley unit map. So, are we officially left out and no hope of selling out minerals?

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Permalink Reply by MLE on November 10, 2010 at 9:49

Walter,

Just because you were left out of this particular unit does not mean you won't be included in a future unit. Your minerals still have value. I'm not sure you would want to sell them, but that's ultimately up to you.

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